Starting and contributing to a 401k and SEP for my attorney business

BACKGROUND: Hello! I am an attorney thinking of starting a 401k for my business. I am the only employee and sole shareholder. Before I do this I am wondering whether I can contribute both to a 401k and an SEP IRA (or any other sort of IRA) for a combined total of more than $51,000 (I am under 50).

QUESTIONS: For example, let's say I gross $400,000 per year from my S corporation. I pay myself with a W2 a total of $300,000 in salary, from which I make a $17,500 contribution to the 401k. The corporation contributes a total of $33,500 to my 401k as part of a profit sharing plan. Seeing as how my income is $300,000, and 20% of that is $60,000, could my corporation also contribute the max, or $51,000, to an SEP for me, for a total deferral of $102,000 for the year?

I have looked around and cannot find anywhere where this is prohibited

ANSWER: There are income limits that apply when calculating contributions to retirement plans including SEP IRAs and solo 401k plans, both retirement plan types for the self-employed.  For 2013 the maximum compensation used for figuring contributions is $255,000. This limit increases by $5,000 in 2014 to $260,000. The income limit usually increases annually by $5,000 or stays the same.

You are essentially asking if the maximum contribution limits apply separately to each plan (e.g., a SEP IRA and a solo 401k plan) that is sponsored or setup for the same self-employed business. The answer is   the annual contribution limits apply to all plans sponsored by the self-employed business. Therefore, the SEP contributions must be added to your contributions to a solo 401k plan maintained by the same business or vice versa. See IRS Publication560 under section titled “More than one plan” for more on this. In short, no you cannot double contribute, but you can contribute to both a SEP and solo 401k plan in the same year as long as the annual contribution limit is not exceeded.  The annual contribution limit for all plans combined is 51,000 for 2013 and $52,000 for 2014. 

Thanks,

Ben in California